Business Ethics Pays on the Bottom Line!

by Managing Values on June 15, 2014

How to win engagement from Board members and their CEO’s has been a longstanding challenge for business ethical professionals. For far too it seems we have been frustrated to hear organisational leaders lament their missing mandate from their Boards and shareholders to invest in the design and implementation of robust business ethics regimes for their organisations. Instead of ethical tone setting being their mandate, they point to the priority placed on securing financial targets in ever shortening time deadlines at the expense of building a sustainable organisational culture where all members know what’s important and their role in ensuring ethical standards are maintained. Profits with principles or values is no easy task but it’s certainly one that is being currently achieved by today’s leading companies who have taken the time and invested the necessary resources to put in place and maintain an ethical infrastructure to underpin their success strategies. Their success can be measured both in financial and in social capital terms. In the private sector it has delivered sustainable profits; high performance workplace cultures and employee engagement; in the public sector is has safeguarded the public purse, the minister’s reputation and the organisation’s longevity.

Leveraging of the case histories of these ethically charged organisations however appears to be too time consuming for the average organisational leader who continues to take business ethical standards for granted or worse, to assume that everyone knows the right thing to do and is prepared to do it. So it was with some degree of pragmatic gratitude that we came across KPMG’s latest research on the UK financial sector www.kpmg.com/uk/bankingresults which found:

Conduct failings and remediation of past mis-selling issues still dominate the banking agenda and costing a fortune. For 2013, it represents approximately 80 percent of the cumulative profits of the five banks. More crucially, customers still don’t feel they’re getting the products, level of service or understanding they require.

It worth a second telling – their research found that two thirds of the cumulative profits of the UK’s top 5 banks or £28.5bn has been spent on litigation, fines and customer redress since 2011. It seems to us that that is a very high price for shareholders; a governance accountability that Boards need to address and a challenge to the prevailing silence on just how organisational leaders intend to go about safeguarding the ethical dimension of their enterprises to ensure shareholders as well employees and beyond that the public good is protected.

Of course investing in ethics costs. Any time of training costs but it also delivers the sort of benefits that regulators, investors and increasingly hyper connected global citizen are demanding of the organisations they want to work in, invest in and do business with. Ethics pays. For leaders the choice is simply one of timing – will you invest up front and ensure you have the systems in place to manage ethical accountabilities or wait until there is a crisis and pay substantially more to try and retain your stakeholder’s confidence. There’s never been a better time to engage with the ethical dimension of business.